Update - 31st January 2012

No change to the outlook except for the fact that the upisde went far beyond expected levels of 12600 on DJIA and well above 1300 on SnP 500. Whilst some bears are jumping to short this market, IMHO it is better to wait for a few more days for complete confirmation of the downtrend [that is eventually expected]

Shorts via March futures created now on DJIA must be hedged with March 12700 Call in the ratio 1:1 or 12800 Call with ratio 1:2 IMHO

For SnP 500, shorts via March futures must be hedged with the March 1310 Call in the ratio 1:1 or 1320 Call in the ratio 1:2. IMHO

If the downturn does occur as expected, then bears could be looking for targets anywhere between 11800 and 12200 in 3 to 5 weeks time, making losses on the calls worth ignoring; if bulls do spring in a surprise, the calls will insure the losses on the futures section.

Next Update: After a weekly close below 12200.......OR 13200 on Dow spot whichever is earlier!!!

Update - 17th January 2012

Seems like the final topping out process is in place. The divergence is evident between Dow and SnP 500 right now. Previous 2 sessions took on 12450 on Dow and 1300 posed a challenge on SnP500.

Today Dow almost took out 12550 [may try for 12600] but SnP is still struggling to take out 1300 [a reflection of poor market breadth IMHO]. Any further uspide will be a boon for bulls whilst bears need to be patient.

No change to outlook; first sign of weakness with a weekly close below 12200; complete weakness to be confirmed only after 2 consecutive closes below 11500 and then bulls can say good bye to 12k levels for a long time to come.

[Please note that the market capitalization is significantly lower even though the indices are just about 5% to 8% lower than the May 2011 highs!]

Update - 3rd January 2012

Happy New Year 2012 to all Dow enthusiasts. Santa Rally did not come through but New Year's trade brought in the much awaited cheer and targets have been achieved as indicated in the previous update. Some more steam possible for another 150 odd points but wouldn't bet too much on it.

By and large, the top seems to be in place and prices should be able to start declining slowly but surely. For those who are long, some profit booking advised with trailing stop loss on marginal holdings.

A weekly close below 12200 will be the first sign that this was a relief rally as expected. As indicated in Dec 2011, full weakness to be confirmed only after 2 consecutive closes below 11500 and then it is adios to higher levels for a long time.

[Dow never leaves any gaps open for a long time on either side of price action unlike emerging markets!]